diff --git a/.envrc b/.envrc
new file mode 100644
index 0000000000..2da5bd8473
--- /dev/null
+++ b/.envrc
@@ -0,0 +1,5 @@
+env=$(nix-build --no-out-link "$PWD/direnv.nix")
+PATH_add "${env}"
+
+# allow local .envrc overrides
+[[ -f .envrc.local ]] && source_env .envrc.local
diff --git a/Makefile b/Makefile
index 465c03ca2d..980fffa320 100644
--- a/Makefile
+++ b/Makefile
@@ -234,7 +234,7 @@ libzauth:
 .PHONY: hie.yaml
 hie.yaml: stack-dev.yaml
 	stack build implicit-hie
-	stack exec gen-hie | nix-shell --command 'yq "{cradle: {stack: {stackYaml: \"./stack-dev.yaml\", components: .cradle.stack}}}" > hie.yaml'
+	stack exec gen-hie | yq "{cradle: {stack: {stackYaml: \"./stack-dev.yaml\", components: .cradle.stack}}}" > hie.yaml
 
 .PHONY: stack-dev.yaml
 stack-dev.yaml:
diff --git a/changelog.d/5-internal/direnv_buildEnv b/changelog.d/5-internal/direnv_buildEnv
new file mode 100644
index 0000000000..8ee4394ab6
--- /dev/null
+++ b/changelog.d/5-internal/direnv_buildEnv
@@ -0,0 +1 @@
+Replace shell.nix with direnv + nixpkgs.buildEnv based setup
\ No newline at end of file
diff --git a/shell.nix b/direnv.nix
similarity index 86%
rename from shell.nix
rename to direnv.nix
index 334f8007c3..c29ac40da5 100644
--- a/shell.nix
+++ b/direnv.nix
@@ -90,11 +90,21 @@ let
 
       binPath = "client/bin/kubectl";
     };
+
+    kind = staticBinary {
+      pname = "kind";
+      version = "0.11.0";
+
+      darwinAmd64Url = "https://github.com/kubernetes-sigs/kind/releases/download/v0.11.1/kind-darwin-amd64";
+      darwinAmd64Sha256 = "432bef555a70e9360b44661c759658265b9eaaf7f75f1beec4c4d1e6bbf97ce3";
+
+      linuxAmd64Url = "https://github.com/kubernetes-sigs/kind/releases/download/v0.11.1/kind-linux-amd64";
+      linuxAmd64Sha256 = "949f81b3c30ca03a3d4effdecda04f100fa3edc07a28b19400f72ede7c5f0491";
+    };
   };
-in pkgs.mkShell {
-  name = "shell";
-  LOCALE_ARCHIVE = "${pkgs.glibcLocales}/lib/locale/locale-archive"; # works around https://github.com/tweag/ormolu/issues/38
-  buildInputs = [
+in pkgs.buildEnv {
+  name = "wire-server-direnv";
+  paths = [
     pkgs.docker-compose
     pkgs.gnumake
     pkgs.haskell-language-server
@@ -107,11 +117,12 @@ in pkgs.mkShell {
 
     # To actually run buildah on nixos, I had to follow this: https://gist.github.com/alexhrescale/474d55635154e6b2cd6362c3bb403faf
     pkgs.buildah
-    pkgs.kind
 
     pinned.stack
     pinned.helm
     pinned.helmfile
     pinned.kubectl
+    pinned.kind
   ];
 }
+
diff --git a/docs/developer/dependencies.md b/docs/developer/dependencies.md
index 25a15e4205..3cd670834e 100644
--- a/docs/developer/dependencies.md
+++ b/docs/developer/dependencies.md
@@ -174,11 +174,12 @@ docker login --username=<MY_DOCKER_USERNAME>
 * [Install docker](https://docker.com)
 * [Install docker-compose](https://docs.docker.com/compose/install/)
 
-## Nix
+## Nix + Direnv
 
 Using Stack's [Nix integration](https://docs.haskellstack.org/en/stable/nix_integration/), Stack will take care of installing any system
 dependencies automatically - including `cryptobox-c`. If new system dependencies are needed, add them to the `stack-deps.nix` file in the project root.
-Just type `$ nix-shell` and you will automatically have `make`, `docker-compose` and `stack` in `PATH`.
+
+If you have `direnv` and `nix`, you will automatically have `make`, `docker-compose` and `stack` in `PATH` once you `cd` into the project root and `direnv allow`.
 You can then run all the builds, and the native dependencies will be automatically present.
 
 ## Telepresence
diff --git a/docs/developer/editor-setup.md b/docs/developer/editor-setup.md
index 99509513fe..e21d59025b 100644
--- a/docs/developer/editor-setup.md
+++ b/docs/developer/editor-setup.md
@@ -57,6 +57,16 @@ Install the [projectile][] package for Emacs and do `M-x projectile-add-known-pr
       ad-do-it)))
 ```
 
+### Haskell Language Server
+
+To use HLS bundled in direnv setup, here is a sample `.dir-locals.el` that can
+be put in the root directory of the project:
+```el
+((haskell-mode . ((haskell-completion-backend . lsp)
+                  (lsp-haskell-server-path . "/home/haskeller/code/wire-server/hack/bin/nix-hls.sh")
+                  )))
+```
+
 ### Ormolu integration
 
 There are make targets `format`, `formatf`, `formatc` to re-format
diff --git a/hack/bin/nix-hls.sh b/hack/bin/nix-hls.sh
new file mode 100755
index 0000000000..488cc122e6
--- /dev/null
+++ b/hack/bin/nix-hls.sh
@@ -0,0 +1,10 @@
+#!/usr/bin/env bash
+
+set -euo pipefail
+
+DIR="$( cd "$( dirname "${BASH_SOURCE[0]}" )" && pwd )"
+TOP_LEVEL="$(cd "$DIR/../.." && pwd)"
+
+env=$(nix-build --no-out-link "$PWD/direnv.nix")
+export PATH="$env/bin:$PATH"
+haskell-language-server-wrapper "$@"